Annually, the US Treasury presents its plans in a so-called “Greenbook”. At the beginning of March 2023, the Treasury Green book 2024 was published. In it, the American government, led by President Biden, indicates which proposals there are.
Please note that these are only proposals in the making and have yet to be approved by the US government. We have highlighted some key points for you as American Overseas. Here you can read the entire US Treasury Greenbook.
The proposal would allow individuals living and working abroad to use an average rate for the year to calculate qualified compensation received in foreign currency, as well as for other items of income or expense of such individuals (including retired individuals) as specified in regulations.
The average rate generally would be available for ordinary course payments expected to recur regularly during the course of a year. The proposal would increase the personal exemption amount for foreign currency gain from $200 to $500, to reflect inflation since 1986, and would index this threshold to inflation on an annual basis.
The proposal would also allow individuals to deduct foreign currency losses realized with respect to mortgage debt secured by a personal residence to the extent of any gain taken into income on the sale of the residence as a result of foreign currency fluctuations.
Since an individual may own a personal residence outside the United States that is secured by a foreign currency-denominated mortgage whether or not the individual lives abroad, the proposal would not be limited to individuals who live and work abroad. The proposal would be effective for taxable years after December 31, 2023.
First, the proposal would provide that, in the case where a taxpayer is required to provide Form 8854 to the IRS with their tax return, the time for assessment of tax will not expire until three years after the date on which Form 8854 is filed with the IRS.
This will create parity with the current statute of limitation rules for tax returns when other information returns relating to various international transactions or assets are required to be filed with the return. The proposal will reduce abuse and noncompliance with respect to high-net-wealth expatriates.
Second, the proposal will grant the Secretary and her delegates authority to provide relief from the rules for covered expatriates for a narrow class of lower-income dual citizens with limited U.S. ties. This relief would apply only to taxpayers that have a tax home outside the United States and satisfy other conditions that ensure that their contacts with the United States are limited, and whose income and assets are below a specified threshold.
Evidence of limited contact with the United States may include a demonstration that the taxpayer’s primary residence has been outside the United States for an extended period. Evidence of the taxpayer’s income and assets may include a foreign tax return, information about the value of property owned by the taxpayer and the taxpayer’s sources of income, or information demonstrating that a certain amount of income earned from working outside the United States is excludable from U.S. tax.
No inference would be intended that the evidence acceptable to the Secretary under this provision constitutes the filing of a U.S. tax return. The requirement for an alien to obtain a sailing permit would be repealed. The proposal would be effective for taxable years after December 31, 2023.
Throughout the Treasury Greenbook, it is clear that the Biden Administration is closing tax loopholes, handling exceptions with caution, and still seems to believe that Americans abroad are mainly wealthy.
We, the founders of Americans Overseas, were born in the Netherlands and obtained American nationality through our (American) mother. When we heard about this for the first time around 2013, we were in total disbelief (it can’t be true!), anger (how can they do this?), fear (am I going to get fined or pick up other problems?), and panic (what should I do?).
It is (unfortunately) true that there is an additional American tax levy. But there’s no information from the local government, and when approached, the consulate referred us to the IRS, and the IRS was impenetrable.
That’s why we started this initiative to help people from all over the world by providing proper information to avoid unnecessary panic and offering help free of obligation and free of charge. If needed, we have a network of affordable professionals (accountants) who can help you with your tax obligations.
If you have more questions about the US exit tax and the US tax obligation, you can contact us at Americans Overseas.
Understanding the US tax system, the obligations, and all the additional terms can be difficult. Especially if one lives outside of America. Is your question not answered? Contact us.
U.S. citizens and resident aliens who live abroad are generally required to file a federal income tax return and pay taxes on their worldwide income.Read more... about Who is required to file taxes in the US?
Yes, US citizens are required to file taxes on their worldwide income, regardless of where they are living.Read more... about Do US citizens living abroad still have to file taxes in the US?
Received an American check? You can cash your check in the following ways: cash the check at your own bank, transfer to another person (endorsement), cash checks using an online service or cash the check by another bank.Read more... about How can I cash my US check?
US citizens living abroad may be required to file Form 2555 and/or Form 1116 to claim the foreign-earned income exclusion.Read more... about Are there any special tax forms required for US citizens living abroad?
FBAR (Foreign Bank Account Report) filing is the requirement for certain U.S. individuals and entities to report their foreign financial accounts to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. The FBAR filing requirement applies to U.S. persons who have a financial interest in, or signature authority over, one or more foreign financial accounts if the aggregate value of those accounts exceeds $10,000 at any time during the calendar year.Read more... about What is FBAR filing?